Crop Costs

1
Crop Costs Returnsin a High Input
Strategyversus Common Practices

• Kent Olson, Bruce Potter, Steve Quiring, Jeff
  Vetch, Tom Hoverstad, Seth Naeve, Dale Hicks, and
  Ahnna Olson
• University of Minnesota
• June 12, 2007

2
The situation

• Corn and Soybean yields increasing
• Minnesotaannual 1.8 corn yield increase and
  1.4 soybean yield increase
• Costs continue to increase
• Small profit margins
• Interest in very high yielding corn and soybeans
• Over 400bu. corn and 100bu. soybeans
• Ethanol increasing demand for corn

3
Todays Overview

• Description of study
• Yield results
• Estimated costs of production
• Estimated net returns

4
High Yield Corn Production at Waseca tillage and
nutrient management strategies
WASECA site

• Began with Fall tillage in 2003
• Corn-Soybean Rotation
• Corn Planted
• 2004 2006 Site AWebster Clay loam
• 2005 Site BNicollet clay loam
• Finishing in 2007 with soybean

5
Treatments at SROC
WASECA site

• Three Nutrient Strategies
• University of Minnesota recommendations (UM recs)
• High Inputs
• Variable Inputs
• Two tillage treatments
• Fall none or 16 Deep Zone Tillage (DZT)
• Spring Field Cultivate (SFC) or none

6
Nutrient strategies
WASECA site

• UM recommendations
• Starter Nitrogen, UAN with herbicides, sidedress
  Nitrogen
• High-Input
• Fall Nitrogen, Starter Nitrogen, UAN with
  herbicides, sidedress Nitrogen, Broadcast P K,
  M500 , sulfur
• Variable Input
• Starter Nitrogen, UAN with herbicides, sidedress
  Nitrogen, 9-24-3, SureK, M500 , sulfur

7
Corn Yields
WASECA site

• Southern Research and Outreach Center
• Waseca, Minnesota
• 2004-2006

8
Corn Yields at WasecaUM Recs vs. High Input
WASECA site
9
Corn Yields, SROCand MN Averages
WASECA site
10
Costs of Production
WASECA site

• Inputs and operations used on trials
• Machinery costs from Lazarus Selley late 2005
  and a few from Iowa custom survey
• Typical input costs for Southern Minnesota

11
Costs for Corn with UM Recommendations
WASECA site
UM Recs Spring FC UM Recs Fall DZT
Yield (bu/ac) 161.3 170
Inputs (/acre) 234.03 233.61
Machinery 71.65 87.12
Land rent 160 160
Ins., Misc. Op. Interest 29.75 30.28
Overhead mgt. costs 49 49
Total costs / acre 544.43 560.01
Cost / bushel 3.37 3.29
12
Costs for Cornwith High Inputs
WASECA site
High Input Spring FC High Input Fall DZT
Yield (bu/ac) 182 190.7
Inputs (/acre) 293.81 296.78
Machinery 74.75 90.22
Land rent 160 160
Ins., Misc. Op. Interest 31.14 31.22
Overhead mgt. 49 49
Total costs / acre 608.70 627.29
Cost / bushel 3.34 3.29
13
Corn Production Cost Summary - Waseca
WASECA site
14
Estimated Returns to Land, Management, Overhead
WASECA site

• Using treatment yields and
• estimated costs of production

15
Returns from Corn to Land, Management Overhead
WASECA site
16
Concluding Comments - Waseca
WASECA site

• High Input has highest yields
• Similar Costs per bushel
• Except HI DZT has higher costs
• High Input has a slightly higher returns as corn
  price increases

17
Treatments at SW ROCat Lamberton
LAMBERTON

• Two strategies
• Common practices
• High input strategy
• Three cropping sequences
• Continuous corn
• Corn-Soybean
• Soybean-Corn

18
Cultural practices
LAMBERTON

• Common practices strategy
• University or common recommendations
• Fall urea or anhydrous, some starter fertilizer
• 34,000 seeds/ac for corn
• High Input strategy
• Fall urea, plus beef manure in alternate years
• Higher spring NPK plus sulfur and zinc, higher
  starter, side-dress N in June
• 38,000 seeds per acre
• Tillage moldboard in 03
• then on high input and continuous corn
• Weed control was the same
• Insecticide applied to continuous corn

19
Corn and Soybean Yields
LAMBERTON

• Southwestern Research and Outreach Center
• Lamberton, Minnesota
• 2004-2006

20
Corn Yields, SW ROC
LAMBERTON
21
Corn Yields, SW ROC
LAMBERTON
22
Corn Yields, SW ROC and Minnesota averages
LAMBERTON
MN ave. for 06 is Nov 1 forecast
23
Soybean Yields, SW ROC
LAMBERTON
24
Soybean Yields, SW ROC
LAMBERTON
25
Soybean Yields, SW ROC and Minnesota averages
LAMBERTON
MN ave. for 06 is Nov 1 forecast
26
Costs of Production
LAMBERTON

• Inputs and operations used on trials
• Machinery costs from Lazarus Selley late 2005
  a few from Iowa custom survey
• Typical input costs for Southwestern Minnesota

27
Costs for Common Practices
LAMBERTON
Cont. Corn Corn C-SB Soybean C-SB
Yield (bu/ac) 178 182 61
Inputs (/acre) 210 180 103
Machinery 83 80 70
Land rent 150 150 150
Misc. Op. Interest 29 28 21
Overhead mgt. costs 49 49 49
Total costs / acre 521 488 394
Cost / bushel 2.93 2.68 6.42
28
Costs for High Input Strategy
LAMBERTON
Cont. Corn Corn C-SB Soybean C-SB
Yield (bu/ac) 192 214 64
Inputs (/acre) 254 258 121
Machinery 102 98 85
Land rent 150 150 150
Misc. Op. Interest 31 31 26
Overhead mgt. costs 49 49 49
Total costs / acre 586 586 431
Cost / bushel 3.06 2.74 6.71
With no charge for the nutrients in manure
29
Production cost summary
LAMBERTON
30
Production cost summary
LAMBERTON
31
Production cost summary with charge for manure
nutrients
LAMBERTON
4.06
3.64
9.68
32
Estimated Returns to Land, Management, and
Overhead
LAMBERTON

• Using treatment yields,
• estimated costs of production, and three price
  levels
• (starting with current adjusted target prices)

33
Returns to Land, Management Overhead by Rotation
LAMBERTON
SB/C price ratios 2.32
34
Returns to Land, Management Overhead by Rotation
LAMBERTON
SB/C price ratios 2.32, 1.92
35
Returns to Land, Management Overhead by Rotation
LAMBERTON
SB/C price ratios 2.32, 1.92, 2.03
36
Concluding comments
LAMBERTON

• In this study
• High Input has highest yields
• Corn in a C-SB rotation has higher yield than
  Continuous Corn
• In both Common and High
• Common Practices has lowest costs
• Both per acre and per bushel

37
Concluding comments, page 2
LAMBERTON

• At current target prices, Common C-SB has the
  highest net return
• As prices rise SB/C price ratio declines
• Common Continuous Corn net return increases
  above C-SB net return
• But not for High Input
• Common Practices still remains more profitable
  than High Input

38
Overall Concluding Comments

• High Input has higher yields
• High Input has a slightly higher corn returns as
  corn price increases
• As prices rise SB/C price ratio declines
• Common Continuous Corn net return increases
  above C-SB net return
• But not for High Input
• Common Practices still remains more profitable
  than High Input

39
Questions? Comments?

• Thank you!